200212425L
AP 75
Date: December 10, 2002
To: Audit Managers
From: David Rock
Via: Otis Fields, Manager
Subject: Percentage Based Reporting
SB 1319 authorizes certain businesses to assess the taxability of their
purchases through a percentage based reporting method and assess tax refunds
using a sampling method.
Attached is the approved percentage based reporting guidelines. If you have any
questions, please call me at 512-475-0248.
Audit Plan Summary
The following procedures are to be completed on each Identifiable Business
Segment:
(1) Identify each Business Segment
(A) Identify categories- Expense Purchases, Assets purchases, Other
(B) Determine Sample/Detail procedure
(C) Develop a Sampling Approach
(1) Identify Populations
(2) Identify Accounts of Interest
(3) Verify Population bases
(4) Select Samples in accordance with Comptroller guidelines
(5) Analyze samples in accordance with Comptroller guidelines
(6) Comptroller issues Notification of Sampling and approves sampling approach
(D) Develop a detail time line for completion of prescribed procedure.
Percentage Based Reporting
(1) Approval Process
(A) Written request to the Manager of Audit Division
(B) Auditor Assignment
(C) Preliminary Meeting
(1) Discuss areas included in the managed audit
(a) Asset Purchases
(b) Expense Purchases
(c) Other categories
(2) Audit Procedures for Approved Areas
(a) Sample/Detail Determination-Comptroller will issue a Notification of
Sampling Procedures on all approved
(b) Identification of Accounts of Interest
(c) Establish Preliminary Completion date
(3) Determination if taxpayer qualifies for program in areas request
(a) Taxpayer must be a Direct Pay Permit Holder
(4) Duration-The taxpayer will be allowed to report using authorized
percentages for a three-year period, unless the Comptroller revokes the
authorization.
(5) Revocation
(a) Authorization may be revoked if the Comptroller determines that percent
being used is no longer representative because of a change in:
(i) law, including change in interpretation of law or rule; or
(ii) The taxpayers business operations.
(b) Decision to deny or revoke authorization is not appealable
(c) May be revoked by either party with a 60 day written notice.
(6) Comptroller may categorize transactions by:
(a) Dollar
(b) Type of purchase,
(c) Purpose or use,
(d) Other standards appropriate to the taxpayer’s operations.
(7) Formal Approval to proceed is granted
(a) Formal Contract executed
(b) Audit Plan Summary, which includes the procedures to be applied to each
identifiable business segment, is developed jointly with the taxpayer. See
attached guidelines for audit plan summary.
(II) Fieldwork completion based on time lines established in Audit Plan
Summary. Schedules submitted by the taxpayer must be in a format specified by
the Comptroller. Comptroller approval is required at various steps as outlined
in the Audit Plan Summary.
(III) Comptroller reviews fieldwork, finalizes schedules, and provides
preliminary results to the taxpayer.
(IV) Comptroller issues Letter of Authorization by attaching Exhibit A to the
Sales & Use Tax Compliance Agreement.
As STAR is the Comptroller's research system for Texas tax policy issues,
only tax-specific audit policy memos (AP Memo) are included here. AP memos
not on STAR can be found on Window on State Government on the
Audit Memos web page.
ACCESSION NUMBER: 200212425L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 12/10/2002
TAX TYPE: SALES